How do you build a holding company for acquisitions?

What a holding company is, and why acquirers use one

A holding company is a parent company that owns other companies. For an acquirer, it is the company you are actually building. The businesses you buy are its subsidiaries.

Most first-time buyers think about the business they want to buy. The buyers who end up with the most valuable companies think about what the business goes into. The difference matters for three reasons.

• Value. A group of businesses with shared management, reporting and capital is usually worth a higher multiple of earnings than any one of them alone. Buyers pay more per dollar of profit for size, diversification and a team that can keep buying.
• Financing. Lenders and investors underwrite a parent with a track record, audited numbers and several cash flows differently from one owner with one business.
• Options. A holding company can sell, hold forever, recapitalize, or in some cases go public. A single small business usually has one exit: a sale.

For the basics of the structure itself, see what a holding company is and what it does and its pros and cons.

Where the value comes from: the math

The core idea is multiple arbitrage. Small businesses sell for low multiples of earnings. Larger groups sell for higher multiples. GF Data's 2024 medians show the gap: businesses worth $1 million to $10 million traded at about 4.5x EBITDA, those worth $10 million to $100 million at about 6.5x, and those worth $100 million to $500 million at about 9.0x.

Here is the illustration we use on the Meraki Dealmakers home page, step by step:

1. Buy a business earning $1 million a year in profit.
2. Pay 4x profit: $4 million, funded with a mix of debt, a seller note and equity.
3. Put it inside a holding company the market values at 10x profit.
4. That $1 million of profit now supports $10 million of value, before any growth.
5. The $6 million difference is value created for the holding company's owners, but only if the platform actually earns that 10x multiple.

That is the opportunity. The risks are just as arithmetic. If you pay 7x instead of 4x, most of the spread is gone. If the business shrinks after you buy it, you own a smaller profit at a price you can't take back. If you fund it with too much debt, one bad year can cost you the company. And a 10x valuation is not automatic: it has to be earned with size, growth, clean numbers and a credible team. Real multiples vary widely by industry and size. See how multiple arbitrage works and why roll-ups fail before relying on it.

The four levers

Every valuable holding company is built on the same four levers. The work is to apply them to your situation, in the right order.

1. Capital

Capital is how you pay for deals and how much of the company you keep. The sources, roughly in the order a buyer uses them:

• SBA 7(a) loans for the first deal: up to $5 million per borrower including affiliates, with at least 10% equity from the buyer under the current rules (SOP 50 10 8.1, for loans numbered on or after October 1, 2026). See using SBA for a second deal.
• Seller notes, where the seller lends part of the price back to you.
• Rollover equity, where the seller keeps or takes a stake in the holding company. See rollover equity.
• Earnouts, paid only if the business performs, though SBA-financed deals cannot use them. See earnouts.
• Investor equity at the holding-company level or deal by deal. See raising capital before the first acquisition.
• Stock in the holding company itself, paid to sellers. This is most useful when the stock is public and can be sold. See paying a seller with stock.

The capital question most buyers miss comes at deal two. SBA debt finances one deal well. It does not finance ten. See how to fund acquisitions two through ten.

2. Talent

The owner of a holding company cannot run every business it buys. The talent lever is three groups of people:

• Operators who run each acquired business, often the seller's best manager, kept on with equity or incentives.
• Advisers and a board: a lawyer, an accountant who can get the books audit-ready, a lender relationship, and two or three people who have built or run larger companies. See who belongs on a holding company's first board.
• A finance function that consolidates the numbers every month. Without it, you can't see what you own, and nobody can finance it.

3. Opportunities

Deals come to buyers who can close. Brokers and owners send their best opportunities to the buyer with credibility, committed financing and a clear description of what they buy. A written buy box (industry, size, geography, margin, owner situation) does more for deal flow than any database subscription. See whether your first business is a platform and how to buy a competitor.

4. Acquisitions

This is buying profit at a lower multiple than the holding company is worth, and then integrating it. Integration is where most of the value is made or lost: reporting, pricing, purchasing, systems and people. A holding company that buys well and integrates badly is just a collection of risks. See how to run a roll-up as a small business owner.

The order of operations

1. Decide what you are building. Write the thesis: industry or industries, target size, how many deals over what period, and what the group should look like in five to seven years.
2. Form the parent. The entity choice (LLC or C-corp) depends on taxes, investors and whether a listing is possible later. See LLC or C-corp and setting up a holding company for multiple LLCs. If you already own a business, see moving it under a new holding company.
3. Raise before you find the deal. Raising after you sign a letter of intent puts you under time pressure and weakens your terms. See when to raise capital.
4. Build the bench. Line up the lawyer, the accountant, the lender and the first board members before the first deal closes.
5. Buy the first business on terms you can survive if it underperforms for a year.
6. Set up reporting in year one so the second deal is easier to finance: monthly closes, clean books and a consolidated view.
7. Add businesses at multiples below the group's, and integrate each one before the next.
8. Decide the long-term path: hold, sell, recapitalize or list. See how holding companies are valued.

Private or public?

Most holding companies stay private, and most should. A private holding company is simpler and cheaper to run. It does not have to publish its results.

A public holding company has two things a private one doesn't. Its stock can be sold, so sellers will accept it as payment. And it can raise capital from the public markets. Those are the reasons a small holding company with real earnings might list. An academic study of more than 6,000 IPO registrations from 1990 to 2024 found that going public raised a company's annual probability of making an acquisition by about 12 percentage points, and about three-quarters of the extra deals were paid at least partly in stock. The same study found that, among newly public firms, stock-paid deals underperformed cash deals by 20 to 30 percentage points over three to five years. Being public helps you buy; it does not make you buy well.

I have taken 17 companies public: 11 by direct listing, 4 by reverse merger and 2 by IPO. My view is that going public fits a holding company with real earnings or a clear path to them, books an auditor can work with, and an acquisition program that needs a currency other than cash. It does not fit a company that hopes a listing will solve its problems. See should a holding company go public, and at what size.

Our best outcome, not a typical one: a company went public with about $1.5 million in revenue at a $3.5 million starting valuation after raising about $100,000. Over seven years the founder made three acquisitions. One failed and was closed; one succeeded. He sold the original business, moved to Nasdaq, and sold the company for $240 million in cash.

If you are buying your first business

You don't need a holding company on day one, but you should decide whether you are buying a job or starting a group. If it is a group, form the parent before you buy and make the first business its first subsidiary. Choose a first business that could be a platform: one with a manager who isn't the owner, recurring customers and room to add similar businesses. See ETA, search fund, independent sponsor or holding company.

If you already own a business

You may already be running a holding company without calling it one. The questions are whether your business can be the platform, where the next business should sit, and how you will pay for deals after the first. See financing a second business and where a second business should sit.

Where these numbers come from: GF Data 2024 median multiples, as compiled by Carry & Conquer; the IPO and acquisition study summarized on the CLS Blue Sky Blog (July 14, 2026); SBA SOP 50 10 8.1 as summarized by beancount; the $4 million illustration and the $240 million example are from Meraki Partners' own work. Joel Arberman has taken 17 companies public and closed 8 M&A transactions over 30 years in capital markets. SOP 50 10 8.1 applies to loans that receive an SBA loan number on or after October 1, 2026 (SBA Information Notice 5000-880695).

Related questions

How much money do I need to start a holding company?

Forming the entity costs little. The real requirement is the capital for the first acquisition: at least 10% of the project cost in equity on an SBA-financed deal, plus legal, accounting and diligence costs. See what it costs to set up a holding company.

Can a holding company own businesses in different industries?

Yes. A diversified holding company is simpler to describe than to run, because shared services and integration savings mostly come from businesses that are alike. Most small holding companies start in one industry and diversify later.

Should each acquired business be its own LLC?

Usually yes, so that one business's liabilities stay with that business. Lenders, especially SBA lenders, also want to see each borrower clearly. Confirm the structure with your lawyer and accountant.

When does a holding company become worth more than its parts?

When buyers or investors will pay a higher multiple for the group than for the businesses separately. That usually takes consolidated reporting, a management team that isn't the founder alone, and enough size to be treated as a platform.

What comes next

Once you know what you are building, the next question is whether it should ever be public, and at what size that makes sense. See should a holding company go public.

Related articles

• How do you fund acquisitions two through ten without more SBA debt?
• What is multiple arbitrage and how do roll-ups create value?
• How do you raise capital for a holding company before the first acquisition?
• How do you set up a holding company for multiple LLCs?
• What does an acquisition adviser cost compared with a course or mastermind?

• Can you build a "Berkshire Hathaway for small businesses"?
• What is Meraki Dealmakers?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.